The variable overhead variance is affected by both input price changes and by how efficiently overhead is used.

Question

Quizplus · Accepted Answer

The variable overhead variance is calculated by comparing actual variable overhead costs incurred to expected variable overhead costs based on the standard overhead rate and standard activity level. Changes in input prices can affect the actual variable overhead costs, while efficiency in the use of overhead resources can affect the expected variable overhead costs. Therefore, the variable overhead variance is affected by both input price changes and efficiency in overhead usage.

The Variable Overhead Variance Is Affected by Both Input Price